243 (16 December 2015)

Welcome to week 243!  The articles below caught my attention this week.  Please note that what are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********).  The links to articles preceded by [SR] require a subscription to be read in their entirety, although complete articles may frequently be found by an Internet title search.

(10 December 2015): “The I-Word Our Debates Are Missing” (http://www.wsj.com/articles/the-i-word-our-debates-are-missing-1449705312)

——–[From the Opinion pages, by Glenn Hutchins of the Brookings Institution.]  “As presidential candidates crisscross the nation, economic inequality has become a rallying cry.  That is important: Opportunity in the U.S. should inure to all, not just a privileged few.  Nonetheless, I wish that politicians would spend more time addressing economic insecurity, which has become the dominant way average Americans understand their household budgets.”  A 2014 study by Brookings “found that up to 40% of American households live hand-to-mouth.  They spend all their available financial resources every pay period.”  In 2011, a Brookings study “explored ‘financial fragility,’ defined as the inability to muster $2,000 within 30 days to cover an unexpected expense . . . Half of those queried did not believe they could come up with the money.  That includes almost a quarter of households making between $100,000 and $150,000.”  These studies and others indicate that “Both economic inequality and insecurity need to be addressed.”

********Hutchins goes on to discuss a variety of remedies for inequality and for insecurity.  It strikes me that the former are oriented more toward the economic system, i.e., macroeconomic, whereas the latter are oriented more toward the individual, i.e., microeconomic.

********In a related article, “The Roots of Republican Fears on Immigration and Trade” (http://www.wsj.com/articles/the-roots-of-republicans-fears-on-immigration-and-trade-1450107708), economic (and personal) insecurity are connected to the current presidential campaign season.  It compares positions taken by president Ronald Reagan and some current Republican candidates in relation to trade and immigration, and the meaning of Japanese internment.  “In the Reagan view, both the arrival of immigrants and the opening of borders to trade added to American economic strength.”  Regarding the Japanese internment during WWII, when Reagan signed a 1988 bill providing financial restitution for those interned, he said that internment “based solely on race” constituted “a grave wrong.”  That some candidates hold quite different positions now, so argues columnist Gerald F. Seib, stems from increased economic insecurity and changing demographics.  An interesting read with some surprising poll results.  For example, “a new Wall Street Journal/NBC News poll, [shows] Democrats were more than twice as likely as Republicans to say that immigration helps America . . . [and] A higher share of Democrats—56%—said free trade is good for America than the 48% of Republican[s] who said free trade was beneficial.  In addition, Republicans were only slightly more likely than Democrats to identify themselves as strong supporters of business interests.”  These outcomes seem consistent with the movement of “more blue-collar and rural Americans . . . toward the GOP since the Reagan presidency began.”  All this is taking place at a time of large-scale population movements from rural to urban areas, a global trend that is discussed, somewhat narrowly, in “Urban Planet: As World Crowds In, Cities Become Digital Laboratories” (http://www.wsj.com/articles/as-world-crowds-in-cities-become-digital-laboratories-1449850244).  The article is part of the 2050 series.

(10 December 2015): “As the Gig Economy Changes Work, So Should Rules” (http://www.wsj.com/articles/as-the-gig-economy-changes-work-so-should-rules-1449683384)

——–The growth of the “gig” economy has given rise to controversy highlighting “a little-appreciated gap in the U.S. economy: its labor laws and institutions haven’t kept up with how the needs of businesses and workers have changed.  In the U.S., you are either an employee, or you aren’t.”  According to a new study by Seth Harris (Cornell University) and Alan Krueger (Princeton University), “What the U.S. needs . . . is a new category for gig-economy jobs that blends elements of both.”  According to them, a new, “independent worker,’ designation is need to help clarify this situation, the object being “to ensure that companies thrive based on the strengths of their business model, not on ‘regulatory arbitrage,’ that is, their ability to pay for employees than other firms do.”

********There has been a good deal of attention given in recent months to the need to expand the categories of labor regulation to encompass the work arrangements of the gig economy.  Grep Ip provides a useful summary of the issues and whetted my appetite to learn more, which you can do by reading the Abstract of “A Proposal for Modernizing Labor Laws for Twenty-First Century Work: The ‘Independent Worker’” at: http://www.hamiltonproject.org/papers/modernizing_labor_laws_for_twenty_first_century_work_independent_worker.  A free download of the 36-page report is available at the site.  As mentioned in the article, Alan Krueger previously “conducted research for Uber” but “Uber had no role in” the Hamilton Project study.  Uber is mentioned prominently in the article as perhaps the most prominent instance of the gig economy.

(10 December 2015): “Tasty!  The Story of MSG” (http://daily.jstor.org/tasty-story-msg/)

********Monosodium glutamate began its life in 1909 when “Japanese chemist Ikeda Kikunae went looking for a way to make healthy, bland food more palatable.”  Eventually he “isolated an ingredient in sea kelp that helped give konbu dashi, the ubiquitous Japanese broth, its flavor.  Ikeda also came up with the word umami—‘tasty’ in Japanese—to describe MSG.”  The Suzuki Chemical Company developed the Ajinomoto brand of MSG as “a predictable, convenient, scientifically proven product.”  But in the 1960s, “with the publication of Silent Spring and new studies warning about possible carcinogenic effects of artificial sweeteners, Americans increasingly questioned the use of food additives” like MSG.  “In response, Ajinomoto transformed its marketing, veering away from the idea of a scientifically formulated product and toward natural imagery.  At the same time, it sponsored research that suggested umami was a previously unrecognized fifth basis taste.”

********It appears, then, that if changing the product is not palatable to the company, changing its marketing may be.  Livia Gershon concludes her article, noting “whether we like the idea of eating . . . [MSG] probably still depends on whether we see it as a scientifically engineered ‘chemical’ or a source of naturally delicious umami.”  You can learn more about umami at: https://en.wikipedia.org/wiki/Umami.

(10 December 2015): “NC Utilities Commission approves electricity discounts for industrial customers” (http://www.newsobserver.com/news/business/article49098865.html)

——–“The N.C. Utilities Commission this week approved a special discount on electric bills for industrial power users, a price break Duke Energy has been seeking for favored customers for at least four years.  The corporate subsidy, known as a ‘job retention tariff,’ is designed to keep employers from laying off workers or moving out of state by offering industries a financial incentive to stay in North Carolina.”  Although the concept was opposed by some large power users . . . the Utilities Commission agreed that the industrial power discount would benefit the entire state.  North Carolina has lost more than 200,000 manufacturing jobs in the last decade, and in the past 15 years, Duke Energy Progess’ industrial power sales fell 28 percent.”  North Carolina’s Public Staff, “the state agency that advocates for ratepayers . . . supported the industrial rate discount, but only when it would prevent loss of jobs, along with other restrictions.”  Those restrictions won’t be spelled out until Duke proposes a discounted rate and related details, possibly next year.”  The industrial discount was conceived when “Duke was seeking support for its merger with Raleigh-based Progress Energy.  Industrial customers agreed not to fight the merger in exchange for a promise from Duke that it would seek a special discount for the industrial power users.”

********This will be something to look for in 2016.  Were the companies—certainly ‘industries’ is the wrong word—leaving North Carolina really that sensitive to energy prices?  You can read the 25-page statement of the Utilities Commission, as well as its five-page Appendix, at: http://starw1.ncuc.net/NCUC/ViewFile.aspx?Id=d41cd417-9391-4f7e-8bce-aea0fe107d94.

(12 December 2015): “Economies of Ail: How Bacteria Flourish” (http://www.wsj.com/articles/economies-of-ail-how-bacteria-flourish-1449847072)

——–“In an unusual marriage, biology and economics appear to be a match made in heaven.  Four years ago, two former roommates reunited at a friend’s wedding had time to catch up.  The first, an economist, asked: ‘What are you working on?’  The second, a biologist, answered: ‘How microbial communities interact.  It’s kind of like in economics.’  And that’s when the intellectual sparks began to fly.  Turns out microbial communities . . . expand by trading metabolites such as amino acids with other species of bacteria, just like free-market economies grow by exchanging goods and services.  That novel insight . . . provides a framework to explain how different species of bacteria interact in complex communities.”  The work of the two former roommates, economist Joshua Tasoff of Claremont Graduate University and biologist Michael T. Mee of Boston University, has given rise to what they call “biotic general equilibrium theory, or BGET, to predict changes in microbial populations based on their level of trading.”  Tasoff notes, “If a species is wasting valuable resources, they’re not going to be around for long . . . Maybe the reason they are exporting valuable resources is because they are trading with each other.”

********Surprisingly, a Google Scholar search on the term “biotic general equilibrium theory” yielded only one hit: “An Economic Framework of Microbial Trade” (http://journals.plos.org/plosone/article?id=10.1371/journal.pone.0132907); the article can be downloaded for free.  It would seem, therefore, that the authors are on the ground floor of a new approach that will surely give rise to much new research at the intersection of economics, biology, and environmental science, even if the sense of trading, which usually carries with it a sense of volition, is subject to inappropriate anthropomorphisms.  For an earlier book-length examination of the relationship between economic and ecological ideas, an excellent source is Nature’s Economy: A History of Ecological Ideas (http://www.amazon.com/Natures-Economy-History-Ecological-Environment/dp/0521468345/).

(14 December 2015): “Now Prices Can Change From Minute to Minute” (http://www.wsj.com/articles/now-prices-can-change-from-minute-to-minute-1450057990)

——–“Adult passes to the Indianapolis Zoo used to cost $16.95.  New they set customers back $8 or $30—or almost anywhere in between.  The zoo prices tickets like airfares, changing prices daily based on advance sales and expected demand.  It discounts cold weekdays in February and boosts prices after school groups book dozens of tickets.  Since introducing such dynamic pricing last year, the zoo’s admission revenue has grown 12%.”  The Zoo isn’t alone.  “Backed by vast amounts of data and powerful software, more businesses are varying prices by the day, the hour, or even the minute.  Online sellers have used such tactics for years, but frequent price changes are increasingly common in the physical world, amplifying the effects of supply and demand on everything from parking spots to golf-course greens fees.”  In Dallas, toll prices can be changed every five minutes and “250 ski resorts in North American adjust the price of advance-sale tickets daily.”  Electronic price tags are also becoming more prominent—Kohl’s Corp. uses them “in 1,200 stores to change prices for busy and slow times.”  According to Peter Fader of the University of Pennsylvania, “This is not a passing fad,” noting that Amazon made dynamic pricing the norm and “it’s going to become imperative for the brick-and-mortar players to figure out how to do this.”  According to economists, dynamic prices makes consumers pay more on average.

********In relation to the sentence immediately above, the idea is that different prices for different people under different circumstances, i.e., price differentiation, will allow some of the “consumers’ surplus” that exists under a one-price regime to be transferred from consumers to sellers.  The availability of low-cost, actionable information and pricing adjustments has made dynamic pricing profitable in situations it wasn’t possible previously.  The person who first recognized the role of price differentiation and consumers’ surplus was the French public engineer Charles-François Dupuit (1742-1809), who you can learn more about at: https://en.wikipedia.org/wiki/Charles-Fran%C3%A7ois_Dupuis.  You can learn more about his work and the tradition in which he worked in Secret Origins of Modern Microeconomics: Dupuit and the Engineers (http://www.amazon.com/Secret-Origins-Modern-Microeconomics-Engineers/dp/0226199991/).

(16 December 2015): “In China, Diners Pay for Clean Air With Their Entrée” (http://www.nytimes.com/2015/12/16/world/asia/china-air-restaurant-clean-charge.html)

——–“Has clear air become such a luxury in China that restaurants can charge patrons for it?  That question raged on Tuesday after Xinhua, the state news agency, reported that a restaurant in the eastern province of Jiangsu was doing just that.  The restaurant, in Zhangjiagang, near Shanghai, was adding 1 renminbi, or about 15 cents, per customer as a ‘clean air fee.’  The restaurant’s move came a week after Beijing issued its first ever ‘red alert’ over air pollution, causing the capital to come to a virtual standstill.”  Social media debate over the restaurant’s actions “was divided between those contending that clean air is a basic right, not a commodity, and those who countered that the restaurant incurred costs to install purifiers to clean the air and is thus entitled to charge for that service.”

********Sitting in the wake of the recent Paris climate agreement (http://www.nytimes.com/interactive/2015/12/12/world/paris-climate-change-deal-explainer.html), fees and discussions like these will surely be more numerous.  The complete text of the Agreement can be read at: https://www.documentcloud.org/documents/2646274-Updated-l09r01.html.  On the general topic of climate change, two solar articles are worth noting, one on batteries (https://www.washingtonpost.com/news/energy-environment/wp/2015/12/15/huge-deal-provides-the-latest-evidence-that-the-battery-business-has-arrived/) and one on public policy on rooftop solar in California (http://www.latimes.com/business/la-fi-rooftop-solar-subsidy-20151215-story.html).

 

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